Fear and greed are two permanent conditions of human nature. They’re also two of the only lessons we can apply to all investing cycles.

Fear of missing out on the next winner and the greed of letting it ride to the top to take every last penny describe almost every boom and bust of the previous century.

These two emotions drive what’s called the Behavior Gap – the difference between an investment’s return and an investor’s return.

We’ve all seen some version of this tweet, “If you invested $100 in Apple at IPO and held it until today you’d have $100,000”. The problem with this thinking style is that it completely ignores human behavior.

We tend to want to back winners and run from so-called losers. A company whose growth has slowed looks like it should be cast off, and the unstoppable grower looks like an obvious investment.

We’re even prone to less diligence when growth is high when we should be doing more to verify that the growth is real. All because we fear missing out on the next big thing.

If we make a habit of investing in only the obvious, we’ll always pay a higher price. The market and investing don’t reward us for reacting in comfortable ways. It rewards those who can endure discomfort and have the courage to make the decisions others can’t bring themselves to do.

Be fearful when others are greedy and be greedy only when others are fearful.

-Warren Buffett

Of course, we don’t purposely buy high and sell low, no one logically would do this. But our emotions create the conditions for us to forget this logic in the moment.

I’ve considered the above in the context of the current state of energy transition investing. From 2020 to 2022, the prices of stocks and private companies in these markets soared. People feared missing out on the next generational trend. The shift from fossil fuels was the opportunity of a lifetime.

Then, as interest rates rose, investors ran the other way just as quickly as they flowed into the space. Valuations collapsed, and investors fled for more stable, cash-flowing investments or the new hot thing.

But the energy transition remains a generational trend. Globally, more solar was deployed in 2022 than in any other year, and EV growth still eclipsed 30% when almost no other industries are growing 10+%.

Yet, most media coverage focuses on how bad things are for the energy transition and how it was all a blip on the radar. Yes, the momentum isn’t 2021 levels of good, but it’s also not 2012 levels of bad.

Investing in the energy transition was never going to be easy. It just looked that way for a few years. The returns come when the conviction to weather the storm outweighs the desire to take shelter.